Introduction to Finance

Time draft
An instrument requiring pay-
ment at a later date
Time value 
or
 speculative value of an option
Diff erence between the option premium and its 
intrinsic value; it is larger the longer the time 
to expiration and the higher the underlying 
stock’s price volatility
Time value of money
Math of fi nance 
whereby a fi nancial return is earned over time 
by saving or investing money
Token coins
Coins with face values higher 
than the value of their metal content
Tombstones
Announcements of securities 
off erings to be placed in newspapers and other 
publications
Trade credit
Credit extended on purchases 
to a fi rm’s customers
Trade discounts
Provided to purchasers as 
an incentive for prompt payment of bills
Securities fi rms
Accept and invest indi-
vidual savings and also facilitate the sale and 
transfer of securities between investors
Securitization
Process of pooling and pack-
aging mortgage loans into debt securities
Selection stage
Applies appropriate capital 
budgeting techniques to make a fi nal accept or 
reject decision
Semistrong-form effi
cient market
A 
market 
in which all public information, past and current, 
is refl ected in asset prices 
Settlement price
Daily approximate closing 
price of a futures contract as decided by a special 
exchange committee
Shelf registration
Allows fi rms to register 
security issues (both debt and equity) with the 
SEC and have them available to sell for two years
Short sale
Sale of securities that the seller 
does not own
Short-term investment policy statement
Guidelines that detail the type of securities the 
treasurer can invest in, their safety or default 
rating, maximum amounts that can be invested 
in each, and the maximum maturity of the 
securities purchased